The US dollar fell sharply after a speech from Federal Reserve Chairman Jerome Powell in which he said it was time for a policy shift and added a key line about maintaining a strong labor market.
“We will do everything we can to support a strong labor market while making further progress toward price stability.”
This line echoes Mario Draghi’s famous line “whatever it takes,” which he also delivered at Jackson Hole.
The line was a pledge to keep interest rates low and intervene in bond markets to prevent the eurozone from collapsing.
This is in effect an option on the part of the Fed, highlighting that interest rates will fall if the labor market falters.
Markets took the message to heart, at least initially. The US dollar fell broadly by 40 to 50 points. The S&P 500 added to its gains.
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Here’s the view from Nick Timeraos, a Wall Street Journal Fed watcher: